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The Exchange
The Exchange 9/12/25
00:44:01
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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You're listening to the Exchange. Here's today's show. Thank you Scott. Welcome to the Exchange. I'm Melissa Lee alongside Mike Santoli. Stocks right now mixed with the NASDAQ leading the gains. The S and P and Nasdaq both hitting all time highs once again today. I feel like a broken record here. The three major averages on pace for a winning week. The move higher coming despite consumer sentiment dropping to the lowest level since May.
- [01:12]
A
Utilities and consumer discretionary among the top performers. Although consumer discretionary is mostly Tesla, materials and health care are lagging on the day. Yields moving a bit higher reversing course from yesterday when we saw the 10 year dip below 4% for a bit and the dollar on pace for its worst week in about a month. Of course a lot of that fits together. We now have a very clear view cemented about the Fed cutting next week. We we think it's 25 probably more to come after that. There is a little bit of a feel of mission accomplished in the markets. You know after yesterday's rally to a high it was pretty inclusive. It was kind of everything working at once and you are starting to see indications that maybe the index is a little stretched relative to its longer term trend. Bespoke had a chart saying it's basically as overbought relative to its 50 day average has been in about a year and change. You see it right there. It doesn't mean we crash from here. It means the bar is high to impress this market. And I do think that's going to be an interesting question as we try to really synthesize this mixed message of yeah, consumer sentiment was actually a downside surprise. You're seeing some wear and tear on on the the household sector and yet corporates are doing great and the markets love it.
- [02:26]
C
We did get the go ahead on the trade through Oracle to as well as Broadcom. So that was good news. But the setup to the Fed meeting in the press conference, as you mentioned, very high. I mean they really have to convey that there are more cuts to come because we saw the pricing yesterday when Steve and Rick were on set. 92% for a rate cut in October. One month later, if we don't get sort of confirmation of that, that's going to be a rude awakening.
- [02:51]
A
And we do get of course the committee's outlook, that's detail, the median expectation for all that stuff. So yeah, there's no doubt that there's room for disappointment. I would just put it that way. Not so much that it's make or break, but that you could see people finding fault with anything that deviates from the perfect benign scenario here.
- [03:08]
C
Yeah, we do want to point out gold, it is on pace for a fourth straight week of gains. It is hovering near an all time high, in fact, the inflation adjusted chart. That's interesting. A new inflation adjusted record in yesterday's session carrying on today, making the rounds.
- [03:22]
A
Yesterday and of course the previous high would have been in 1980. So this is a 45 year round trip in real terms for the price of gold. It's funny because I guess you could take it two ways. One, it's like, well, there it is, gold doing its job again at a time of policy flux and uncertainty and questions about fiscal authorities and dollar strength and things like that. On the other hand, the s and P500 from that point in 1980 is up like 13 times in real terms. You know, not even just, you know, not even just nominally. So equities once again are kind of an inflation beneficiary over longer stretches.
- [04:01]
C
Right?
- [04:01]
A
Yeah.
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C
We do want to get to tech here. The clear winner today as well as this week. The Nasdaq up nearly 2%. If today's gains hold, it will be the 25th record close for the year within technology. Oracle as we mentioned, of course, that's a standout. Seeing the sharpest rally in more than 30 years following earnings. And that's why our next guest is actually trimming it. Joining us now, Charlie Brabrinskoich, Vice chairman and head of investment group at Ariel Investments. Charlie, great to have you with us.
- [04:27]
D
Thanks for having me.
- [04:28]
C
Is this just portfolio management or do you have some question marks about the guidance that they gave?
- [04:33]
D
We're value investors at Ariel and we try and buy things when they're out of favor and sell them when they're in favor. And Oracle has gone from being very out of favor to being very in favor. It's been, I think your predecessor Kelly Evans asked me once what was my favorite value tech stock and I said Oracle, but it was 130 at the time and Oracle went to 350 this week. So I'm trimming it. I still own it, but it is trading at a big multiple of value. They have not been forthcoming in terms of the profitability of this new data center. Contracts that they have. They're clearly going to have massive revenue. How much they're going to actually make on this revenue is not been fully disclosed in the last bear case to Oracle would be that Edelston is going to be funding the paramount purchase of Warner Brothers. And there's some concern that he's been kind of bullish on the outlook for Oracle so that he can get the price up, sell some stock to fund the acquisition of Warner Brothers.
- [05:29]
C
Oh, so the conspiracy theory, juicing the stock so that he can get the other deal done. Although he hasn't sold a share of Oracle since it was founded. So you know, there's, I don't know how, how grounded that fear is. Charlie, it does seem though you mentioned you are a value investor, that this is way outside of, of the comfort zone perhaps of, of your portfolio. And so what are the sort of things in the future that you want to see happen in order for you to feel more comfortable with this? I mean you mentioned the quality of the revenue in terms of the margins. We don't even know if those RPO's are going to turn into revenue as well. I mean just to throw another thing.
- [06:04]
D
Out there, those are binding contracts with AI, with Microsoft. I feel pretty good about that backlog coming to fruition. It's the margins that do give me pause I think. Look, people for a long time thought of the people who are going to provide web services as being Amazon, Microsoft and Google. And we now have to add a fourth firm. Oracle is now clearly a major player in that space. The core thesis was that AI is all about measuring and monitoring your data, not data that's in the public. It's corporations analyzing their own data. And that data sits on Oracle software. That gives Oracle a real advantage in the world and that is what is coming to fruition.
- [06:49]
A
Charlie, how does the overall market seem to you at this point? We've had another one of these attempted rotations or you know, kind of catch up moves by things like small cap and value that you're looking at there. We have the Fed poised to cut. Does it all fit together well or you see things as, as maybe not quite being so rosy?
- [07:09]
D
I think you got to talk about two different markets and we usually talk about a market of stocks, but this is just the magic 7 growth. Large cap growth which dominates the S&P 500 is clearly overpriced, trading at levels close to where it was before the Great Recession. And then you have other pockets of stocks, particularly small cap value that is trading at right at its historic average. So there's lots of still good value. We've had a great three months in small cap value, but it's still reasonably priced. The large growth companies are not reasonably priced, they are overpriced. And you need to be very careful just passively owning the S and P because the S and P owns a lot of those stocks.
- [07:50]
C
Where you find value though, Charlie, really is interesting to me in one of the areas is health care. And I'm wondering what subsector within health care you like because there are a lot of value traps potentially out there. So can you give me the bull case why it's a value investment with upside as opposed to a value trap? Because at least for big cap pharma, the term value trap may not be so far off base, at least for the past year or so.
- [08:13]
D
Yeah. Still the long term trends on the US spending money on health care is still increasing every year. What's obviously hit these stocks hard is the threat of RFK and regulation. We think that will pass effectively. We're going to have to continue to generate new drugs and importantly we're going to have to spend money generating those new drugs. So research firms like LabCorp and Bio Rad are going to do fine. JJ has been a wonderful company for a long period of time. It's now trading at below market multiple kind of 16 times. So we think an aging population, growing demographics around the world, aging demographics around the world are going to increase demand for health care.
- [08:54]
C
And in among some of your stock picks, Charlie Mohawk is an interesting one. Housing adjacent name. What's the bull case here? If interest rates stay high, we've got.
- [09:05]
D
Pent up demand for housing that just, it's undeniable. We've, we've had lots of families formed, lots of household formation has continued at a great pace and yet we're building less houses than we did in the 50s. People want more housing but interest rates are just a little high. We think this is going to be a direct beneficiary of a cut in interest rates. We Got a chance to get below 6% in mortgage rates. When that happens, we think we're going to have a real unlocking of this pent up demand. Mohawk trading at a very reasonable multiple less than 14 times earnings. We love residual which is the old Honeywell thermostat business, trading at about 14 times earnings. These are forgotten parts of the market with pent up demand.
- [09:45]
C
Charlie, great to see you. Thanks, Charlie.
- [09:49]
A
I check out shares of Open door down about 10% following yesterday's 80% spike after the company named a new CEO and I think it was 1100% over the prior couple of months. As part of the shuffle, co founder Keith Raboy is rejoining the company as chairman of the board. He joined Squawk on the street this morning and took issue with Open Board being called Opendoor being called a meme stock.
- [10:11]
C
What do you do though with a meme stock?
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E
I mean it's up is not a hundred.
- [10:16]
C
This is not a meme.
- [10:17]
A
It's not a meme stock. So let's, let's talk about what this means. Is the.
- [10:20]
F
But isn't it all driven by sentiment?
- [10:22]
C
It's not fundamental.
- [10:23]
A
Well, let's, let's talk about this. What is the entire original point of having markets is to allocate capital. Right? First principles. Markets are designed to allocate capital. Consumers are voting with their feet to say we want more capital being allocated to Open Door. That's a good thing. That's how society should work. Like I think the whole retail movement is misunderstood. It's better when consumers say I want more of this and less of that. We don't need professionals. We need consumers saying this is what is better for society. And I want to invest more capital in companies that do this. I mean that's an extreme version of wisdom of crowds as opposed to just the stampede into certain stocks. You know, it's funny. Adam Aaron at AMC embraced AMC status as a meme stock. Why not advantage of it by basically rescuing the company by selling new shares to all those folks, by the way, has not done well for if you are buying holder of amc. But I also find it interesting if you look at the message flow, you know, people who love Opendoor and you'll see responses that say, you know, what do you think about Children's Place or Fubo or these other 2021 meme names along with Open Door that sort of travel in the same circle. So I mean, I don't know. There doesn't have to be a shame in it exactly.
- [11:36]
C
But he was so defensive about it. It's not a meme stock. Why not just say, you know what, I don't care what you call it. If this is all about the retail investor, if this is all about individuals voting with their feet, putting dollars where they think there's opportunity, then that's fine by me. And that wouldn't have pissed off, excuse my French, anybody out there who owned it because they liked the momentum.
- [11:54]
A
Right.
- [11:54]
C
There's a way of couching that.
- [11:57]
A
Who knows, there could be a fundamental turnaround that the crowd is sniffing out, but.
- [12:02]
C
Exactly. I mean, Carvana started off as a mean stock and it really turned around that' Anyway, meantime, the Trump administration, its officials are reportedly planning to link Covid vaccines to child deaths. We've seen shares of vaccine makers Pfizer, novavax and Moderna taking a leg lower immediately on this news, Angelica Peebles joins us with the very latest. Angelica?
- [12:24]
E
Hey, Melissa. Well, Trump, Trump health officials are planning to link Covid vaccines to the deaths of 25 children. That's according to NBC News. The Washington Post first reported that. And these findings are reportedly based on a federal vaccine safety database and that relies on information submitted by anyone. So typically the CDC warns against relying on those reports alone. They say that you should investigate them further. Now, these findings will reportedly be presented next week at a meeting of the CDC's Advisory Committee on Immunization Practices, or ACIP. A spokesperson for the Department of Health and Human Services in a statement saying that FDA and CDC staff routinely analyze vaers and other safety monitoring data, and those reviews are being shared publicly through the established ACIP process. And until that is shared publicly, any of this should be considered pure speculation. And then you have Moderna in a statement saying that the safety of its COVID vaccine is rigorously monitored by the US FDA and regulators in more than 70 countries worldwide, and that with more than 1 billion doses distributed globally, these systems haven't identified any new or undisclosed safety concerns in children or pregnant women. So much more to watch there, guys.
- [13:33]
C
I mean, the key thing here, Angelica, is that what ACP recommends has a direct impact on access to these vaccines through insurance plans, whether or not they are paid for.
- [13:45]
E
Exactly. And that's why this ACIP meeting is so closely watched. And these recommendations are important because even if they are available, those recommendations do dictate insurance coverage. Now, we have heard that insurers might still continue to cover them, even for a broader population than acip, but they are not required to. And that's the key thing here, is that they are required to cover ACIP recommended or, sorry, cdc, but ACIP informed cdc. So those recommended vaccines, but they don't have to. And so then it becomes this question of will you have the haves and the have nots, people who can get the COVID shot and people who can't. And I think that's why you're seeing such a big move, especially Moderna. Of course they're more exposed, they have a lot more on the line than Pfizer at this point.
- [14:29]
A
And Angelica, I guess that would provide a bit of a test if the insurers were no longer required to cover the vaccines. But perhaps some of them chose to do so if they believe that it would create ultimately lower cost and better health. Health outcomes for, you know, for their customers.
- [14:46]
E
Exactly. Everyone wants to see how the insurers are going to respond because it's not just the COVID vaccines. This of course is the one that we talk about the most. It's the most heated issue. Right. People have been debating this for years now. Do you really need more boosters? Have we over boosted and that's why there's so much attention. But it's also going to be other vaccines potentially. We have heard that they might be talking about removing the requirement for newborns to get the hepatitis B shot the day that they're born. And so if that's again no longer a requirement, how exactly do the insurers cover that? And then of course that's the broader question of as you start going down the schedule, what happens there. So this is certainly a test case and I think here too it also speaks to the question of how will the public respond? I mean, you know, this is a scary headline and people might think, gosh, do I really want to get my kid a Covid booster? We have seen those numbers coming down, I just checked. And only 13% of children got last year's booster. So it's not like there's a whole lot of kids out there who are getting vaccinated. But it just brings up this broader question of what does this mean for immunization as a whole.
- [15:51]
A
Yeah, exactly. You're starting to see the rules change in some places regarding school vaccine requirements. Okay, Angelica, thank you very much. Coming up, Warner Brothers Discovery climbing another 16% today, up more than 50% this week on reports confirmed by CNBC that Paramount Skydance is preparing a bid for wbd. Well, that's Needham's Laura Martin. Whether a deal is likely to get done, whether it's a good idea.
- [16:15]
C
Plus stocks at another all time high. But Investors hedging ahead of next week's Fed decision will tell you where they're looking and why it may not be a bearish signal. The exchange is back right after this.
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See.
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Contact Us.
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B
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts. I'm no tech genius, but I knew if I wanted my business to crush it, I needed a website. Now thankfully bluehost made it easy. I customized, optimized and monetized everything exactly how I wanted with AI. In minutes my site was up. I couldn't believe it. The search engine tools even helped me get more site visitors. Whatever your passion project is, you can set it up with Bluehost with their 30 day money back guarantee. What have you got to lose? Head to bluehost.com to start now.
- [18:08]
A
Welcome back to the Exchange. Sources telling our David Faber that Paramount Skydance could be making a bid for Warner Bros. Discovery as soon as next week. WBD up 50% week to date on that news. Our next guest says the merger makes sense for strategic and economic reasons, but she maintains her hold rating on both stocks from well, let's bring in Needham's Laura Martin. Laura, it's it's great to have you here. I mean the way the market has responded to these reports is not just to to carry Warner Brothers stock higher, but also Paramount Skydance and implying the market saying there is value to be created through such a transaction. How much value do you think and what does it tell you about what WBD might actually fetch in a deal?
- [18:48]
G
Right, so we calculate there's about $30 billion of total synergies by putting these two companies together because there's a lot of cost overl both cable networks and studios so you could lay off a lot of people. Secondly, I think the reason Peace Guy is going up is because this is if they make a bid for Warner Brothers, which is like three times bigger than Peace Guy is today. It is clear that the co founder of Oracle, dad Larry Ellison, is behind the full aspirations of the son David Ellison. So that means the credit quality for the debt just got better and as did the equity upside risk reward get better because you've got basically the world's richest man standing behind these assets.
- [19:30]
A
So if you do the math, the 30 billion, let's say in value that could accrue, what does it mean for where Warner goes? Right, in terms of. Because obviously there's a bunch of debt and the stock has already moved a fair degree.
- [19:44]
G
Right. So we show that Warner Brothers, somebody could bid $24 a share for Warner Brothers if they were willing to transfer all 30 billion of the value created by putting the companies together to the Warner Brothers shareholders, which would be sort of a lousy deal for Peace Gu shareholders. But the point is up to $24 a share we think is justifiable under the synergies of putting the two companies together.
- [20:07]
C
If the two companies are put together, Laura, how does it rank in the media landscape then in your view?
- [20:12]
G
Oh my gosh, it'd be fantastic. I mean so, so it would be the fifth largest advertiser with about 18 billion of annual advertising revenue. So sitting behind Google and Metta, but really one of the largest ad driven companies. It would be one of the largest studios, so Netflix, Disney and then this combined studio would number three. It'd be bigger than Universal actually. And then that's from the studios and cable networks. It would be like 50% of total cable channels, which admittedly is a dying business, but it would be by far the largest player and owner of cable networks when you put it together. So really dominant strategic positions in three different businesses also streaming be much more scaled up. So you get it buying a lot of scale all at once. So strategically much better position put together.
- [20:56]
A
I mean it might be laughable to ask the question as to whether that such a deal, given all you laid out there, would get get through on a regulatory side. I mean you could think back a couple of years and the government under a different administration blocked the merger of two book publishers because they said they would have too much power over authors. So here we are taking the big five traditional studios to four potentially and you know, imagine the power that they would have over creators. But I guess it doesn't matter.
- [21:26]
G
So two things. One is, I think a core focus of the administration is going to be the fact that, that CNN would move from liberal hands into the Ellison family hands, which are conservative. I think that would be a regulatory positive. And then from a bigger picture, that's the tail, but it might wag the dog. And then the bigger point of view is, of course, these companies will argue that Apple has a studio, Amazon has a studio, Netflix is building a studio, that the five Hollywood studios aren't actually a thing anymore, that we have really legitimate big competitors with deep pockets. And therefore these companies must consolidate or they're just both going to go out of separately.
- [22:04]
C
And Laura, how do you impute this on the rest of the media space in terms of, you know, it, does Netflix get hurt? Does Versant look much better now? I mean, what are your thoughts?
- [22:14]
G
So what I would say is that I think this is a survival requirement, actually for both of these companies more than. So either they're going to go out of business, which loses the industry to competitors, or they get together and they can compete longer with more resources behind them, especially if the world's richest man is standing behind, behind them with a check. So it allows them to stay longer in the business, I guess. I think it just makes the industries they're in healthier and makes them more competitive. But I don't necessarily, I can't tell you it automatically hurts. Versant versus I don't really think it does. Or another survivor.
- [22:51]
A
All right, Laura, thank you very much. Laura Martin from Needham. Of course, Versant would become the new parent company of CNBC under a planned January 20202026 spinoff.
- [23:04]
C
Coming up, we're awaiting the first trade of Gemini, the crypto company founded by the Winklevoss twins. The IPO pricing at $28 a share, it is now indicated at just around 37. Plus the RH CEO saying the sky in the set in their sector has darkened. We'll take a look at what made him say that and what he sees ahead. Stay tuned.
- [23:27]
B
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview, delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your Podcasts. I'm no tech genius, but I knew if I wanted my business to crush it, I needed a website. Now, thankfully, Bluehost made it easy. I customized, optimized and monetized everything exactly how I wanted with AI. In minutes, my site was up. I couldn't believe it. The search engine tools even helped me get more site visitors. Whatever your passion project is, you can set it up with Bluehost. With their 30 day money back guarantee. What have you got to lose? Head to bluehost.com to start now.
- [24:30]
C
We are awaiting the first trade for Gemini, the crypto company founded by the Winklevoss twins. Price above is expected. Expected range of $28. Last night, valuing the company at around $3 billion. Currently indicated at about 37 here. String of crypto IPOs here for sure.
- [24:47]
A
37. The indication relative to a $28 issue price. It's a relatively modest bump if that's where it ends up and actually follows Klarna, which was also not one of these crazy initial pops. So, you know, maybe we're getting a little bit more sober about it. We had the. Was that run of, like stocks that would double and they would get halted because they were moving so much. So I think that's a net positive. I'm suspicious of enthusiasm and optimism in all its forms.
- [25:12]
C
So we also were talking about the open door.
- [25:15]
A
Yeah.
- [25:15]
C
Meme status. Gemini has 30% of its shares allocated for retail investors. So that could partially be, you know, if you let them in right away as opposed to them flooding in afterwards.
- [25:25]
A
Exactly.
- [25:26]
C
It eliminates or mutes that pop.
- [25:28]
A
You don't have that rush for the narrow door.
- [25:30]
C
Yeah, exactly. Sure. Let's get to Kate Rogers now for a CNBC news update. Kate.
- [25:34]
F
Hi, Melissa. Secretary of State Marco Rubio will head to Israel this weekend to meet with officials about the war in Gaza. The trip follows Israel's strike on a Hamas meeting in Qatar earlier this week. Meanwhile, Israel said it rejected the UN General Assembly's vote today to endorse a two state solution between Israel and the Palestinians, saying, quote, it encourages Hamas to continue the war. Poland's prime minister rejected President Trump's comments that the Russian drone incursion into Polish airspace could have been a mistake. In a post on social media today, Prime Minister Donald Tusk said Wednesday's incursion was not a mistake, quote, and we know it. Poland requested a UN Security Council meeting over the incident. It's scheduled for later this afternoon. And the late Giorgio Armani has instructed his heirs to sell 15% of his company. In his will released today, Armani listed LVMH L' Oreal and Eslier Luxottega as his preferred buyers. 40% control goes to his longtime collaborator Leo Del Orco and 15% each to his niece and nephew with most of the remaining estate to be controlled by the Armani Foundation. Back over to you guys.
- [26:43]
A
Kate, thank you. Coming up, a look at how the options market is positioning ahead of next week's big fake news. Plus the restaurant name that is seeing consistent bearish activity. The Exchange is back after this.
- [27:01]
C
Welcome back to the Exchange. The market has been very enthusiastic this week ahead of Wednesday's Fed meeting with investors pricing in basically a 100% chance of a cut where the options markets seeing ahead of that meeting. Joining us now is Chris Murphy, co head of derivatives strategy at Susquehanna. Chris, great to have you with us. Thank you. Good to be here. So how are investors positioning?
- [27:19]
H
I think everyone's long. I mean we're going to be highlighting to our clients that we're seeing a lot of put spread buying kind of focused on the September 30th time frame. It is the second half of September, still does have some weak seasonality. But the truth is I think you can feel comfortable being in this market at all time. Highs heading into event with some question marks. People are wondering hawkish cut or sell the news, things like that. But if you have some of these put spreads on in macro products like Spider Hughes like we've been seeing, you can feel more comfortable going into that event. Staying long.
- [27:51]
C
Yeah, certainly volatility remaining low has been helpful to this rally to say the least in terms of particular sectors. I mean tech was a big winner this week. I'm assuming you saw commensurate flows there. Are you seeing some bullish activity looking out beyond September in tech?
- [28:06]
H
Well, yes, yes. I mean I think that in the mag 7 we hear so much talk about the market widening out and trying different sectors, things like that. The reality is the mag seven continue to work really well and if you are once again long or you want to add some exposure, you might want to look at a call spread. If you're looking at the options market, call spreads are setting up better now in some of those names because people really want extreme upside upside and when you buy a call spread, you take advantage of that desire for extreme upside. So we've seen some notable call spreads out at year end for Amazon, Google and a couple other ones.
- [28:43]
A
This idea of staying invested and then perhaps taking advantage of low cost hedges, it makes a lot of sense it sort of speaks to a sustainable type move higher. I wonder if you're seeing any evidence as we get closer to the fourth quarter of, of sort of chasing or people just trying to really grab some upside optionality in either sectors or you know, the China market or anything like that.
- [29:04]
H
I mean you just, you just led me into it. The China market for sure. That's an example. I mean especially this week. Obviously you can look at the underlying ETFs and they are ripping, but it's just incredibly consistent call spread buyers in KWEB in a shares. Another example of because there's such an extreme demand for upside, those call spreads set up really well for investors who want to play that into the year end trend or really, you know, a lot of it seems to be focused on November time frame. We have the tariff deadline. You know, there's some positive kind of, you know, headlines here and there. So people are really playing one more leg higher on some sort of deal taking those stocks.
- [29:42]
C
Just going to the flip side, Chris, where are you seeing sort of the most hedging activity? Areas where investors might feel cautious about the gains.
- [29:51]
H
Consumer restaurant names, you know, sweetgreen. Sweetgreen comes to mind. I have four daughters. Taking them to sweetgreen is pretty expensive. Things start to get even more expensive. You know, that's one that had some consistent bearish flow. Even Chipotle every single day put buying. Now I would say those stocks have been hit really hard. Just recently we started to see, we saw a call buyer in January in Sweetgreen maybe trying to pick the bottom. And then in Chipotle end of October put sale once again kind of saying, saying these things have gotten killed. We're going to kind of dip our toe in. But up until just recently those have been under fire.
- [30:27]
A
Seen some commentary about just this wave of kind of structured products that sell options for income. So many of these ETFs are out there. It's sort of the market is constantly supplied with people willing to sell volatility into it. Has that been a tail wagging the dog situation or is there, is there something about that that that makes the rest of the market have to kind of pivot and adapt?
- [30:50]
H
Well, I mean certainly if the market makers of the world continue to get sold options when they hedge, it depresses, moves, things like that. That's certainly the case. However, on the flip side that leads to being opportunities to get long calls on a lot of these different names. I mean would you rather been short calls or long calls in Oracle this week or some of these other names. So you know, the supply of volatility, it always evens out. There's opportunities, equities on the long side because of it. And I think my biggest takeaway is just the extreme amount of liquidity in these markets, even in the lesser known names from a couple of years ago. You can trade all sorts of stock, all sorts of options. There's two way flow. It's pretty it's an amazing liquidity ecosystem right now.
- [31:28]
C
Chris, thanks for coming in. CHRIS murphy, SUSQUEHANNA all right.
- [31:32]
A
Coming up, RH lower following an earnings miss and lowering its guidance, A closer look at what derailed results. Results next. The exchange is back after this. Welcome back to the exchange. Shares of RH falling but they are way off their lows on the back of earnings and lower guidance due to tariffs. Courtney Reagan joining us with more. And Court the CEO saying that the sky in the sector has darkened.
- [32:00]
I
Yeah, I mean he's always really colorful right on these calls and he sort of speaks in platitudes and he's quoting Warren Buffett a couple times. There you go. Yeah, exactly right. Depending on the quarter and what's going going on. But obviously a lot of tariff impact in this quarter and we've been talking about a lot and some retailers talk about it more or less well, this one really the focus of the quarter. They're saying look, there's going to be $30 million in unmitigated tariffs for the rest of this year that we didn't anticipate. They also lowered their earnings or their sales guidance rather for the year because they're worried about just general inflation, general macroeconomic pressures. And because of these tariffs, they're also delaying their fall source book which then they think could delay people from buying, placing those orders in the fall, pushing it off then until next year. So also delaying a brand extension, all of this tying back to tariffs. And by the way, the Trump administration also looking into furniture sellers and this investigation into what they're doing with regards to this tariff scheme. And so none of that is priced into this guidance. So it actually could get even worse from here. We they've really lowered their dependence on China when it comes to manufacturing and really increase the United States. But India now becomes an issue, especially with the hand knotted rugs. They say it makes up 7% of their business. And we know that there's a 50% tariff rate there, obviously a very special trade. So unclear where they're going to replace that. And if they do replace it, all of this too to say that they don't exactly or have not yet exactly figured out their pricing because of the impact of tariffs. So that's also part of the reason and why they're delaying the source book. They got to figure out what their pricing is. And on the earnings call, Mr. Friedman didn't go exactly into what's going on with pricing, but more or less said, look, I don't know how you can. How you can avoid it. I mean, you have to be able to maintain your margins. And just generally talking about this environment and how dangerous this could be if you're a smaller player, saying, I'm not sure you can survive this.
- [33:50]
C
He made the point that he's not going to promote. And they're famous for their membership program where you pay a subscription annually, 200 bucks to get discounted or lower prices. Is there any talk or any thought that those lower prices for members will actually be lower in order to say that we're not discounting, we have this membership?
- [34:10]
I
That's such a good point. And you didn't go into any of that detail. It was not asked specifically, but maybe they'll take your suggestion and figure that one out, because that is very interesting. The cost of the membership seems high, but if you buy. Buy one sofa for $11,000, then, you know, $200 seems well worth it to get a discount of several hundred dollars, even if you just make that one purchase.
- [34:32]
A
He also, you know, accentuated that there really is no domestic alternative for most of what they're doing, and it's a long way before you could even conceive of having that be the case. Is that in the service of trying to say, look, we need some kind of act of relief here on the tariffs? I mean, what are you actually trying to accomplish?
- [34:48]
I
I definitely think that's what that was. I think that was a message. Message to the administration. And he said, we've already moved a lot of our manufacturing for upholstery to North Carolina. They're aiming for that to be 52% of their upholstered manufacturing in the United States by the end of fiscal 2025, and then it will go up from there. But that's upholstered furniture. That's not the whole business. And he's basically saying, we can do it, but not everybody can do it. People are not going to survive. He used those words. And so I do think that is a message to the administration as they are looking into either these current investigation into the furniture tariffs or what's already existing right now.
- [35:23]
C
Court, thank you. Thank you, Reagan. You can see here on your screen, Gemini is open for trade, a pop of 45%. Let's get to Leslie Picker at the Nasdaq. Les.
- [35:30]
J
Hey, Melia. That stock open just moments ago, currently trading up about 45%. It opened at $37. That was about 33% higher than the $28 per share that Jeff and I priced at last night. I don't know if you can see behind me, but you have Tyler and Cameron Winklevoss. They're the founders of the cryptocurrency exchange Gemini. They're behind me at the trading desk, giving each other big hugs when this one opened up. Again, 45%. Right now, this is a company that's about 11 years old and in fact, its top line is declining. Losses have been widening in the first six months of the year. But it plays into this space cryptocurrency, which has seen tremendous demand from the buy side in the deals we've seen come to market this year, including Circle and Bullish. Both have performed very well on their first day of trading. So we'll keep an eye on this one throughout the day. But so far off to a very big start, up about 45% here at the NASDAQ Stock Exchange. Guys, I'll send it back to you.
- [36:31]
A
It seems like maybe the stock was halted. Sometimes that happens. Happens because of the volatility bands that they put around there. Just because of the extreme movement. Less. You know, you mentioned Circle and Bullish. They did have massive one day pops, but they've also traded way off their highs, you know, in the, in the subsequent weeks.
- [36:47]
J
Yeah, that's always the risk here, is that obviously you've got some pretty small floats with these IPOs, and therefore you get the volatility. It's always a matter of supply and demand. And when you have the small flow coming out of the ipo, you tend to see those outsized volatility moves. And I believe a lot of the other crypto names are actually trading lower today. Some of the discussion over here at the NASDAQ was this idea of maybe it's a rotation out of the legacy crypto names that are already trading and then some of the demand coming into Gemini today. But that's definitely one to watch in the coming days as of course, this stock finds its footing and settles down a bit.
- [37:22]
A
All right, Leslie, thanks very much. Coming up, Microsoft and Open Air striking a tentative deal to reorganize Open Air. Unusual corporate structure. Details on that are next. Open Air is one step closer to its long awaited for profit transition. After cutting a preliminary deal with Microsoft, Mackenzie Tagalos digs into the billions this could unlock for the AI darling in today's tech check.
- [37:52]
F
Not Mike. This is a big win for OpenAI. They needed the restructure wrapped by year end to unlock $40 billion in funding and set up an eventual IPO. And Microsoft? They've been the main bottleneck. So after a year of tense talks that intensified this summer, the two finally agreed on a package that pairs commercial terms like Azure, exclusivity, IP access and revenue sharing with a recapitalization that converts Microsoft's investment into standard equity while also giving OpenAI's nonprofit arm a $100 billion stake. Now, this is a big moment for both companies because like it or not, their futures are intertwined for the foreseeable future. They've been tied together since long before ChatGPT made OpenAI a household name. Microsoft's flagship products run on OpenAI's tech and Azure's blowout growth owes a lot to OpenAI's compute demand demand. Now at the same time, OpenAI showed its own leverage at the negotiating table by turning to Oracle for a $300 billion cloud pact, a move widely read as a snub to Azure, just as Microsoft signaled that it has options too by reportedly testing anthropic and building its own models. But ultimately, Microsoft gave OpenAI what it wanted. And investors out here in Silicon Valley now expect to see some major concessions that were quietly made behind closed doors. So watch out for fresh partnerships or contracts that Microsoft may have secured in return. Potentially on the scale of the Broadcom or Oracle deals, guys.
- [39:25]
A
Mac, I assume among many of the implications that you laid out there would also perhaps better equip Open AI to wage the talent wars. I mean you have basically an ability to say this is our structure going forward, we have have a for profit entity and who knows what it means if met is setting the market on this talent. But that seems like one outgrowth of this.
- [39:48]
F
Well, absolutely. The big whisper out here in the Valley is that OpenAI wants to go public and it had to convert into a public benefit corporation in order to phone the Runway from that. We've heard that from CFO Sarah Fryer that this is a prerequisite to listing and that's the point at which you might see them convert from half a trillion dollars valuation into something that puts a presidents that trillion dollar AI club. They certainly helped put Broadcom and Oracle there in the last week.
- [40:13]
C
So what's the other big whisper? Mac in terms of timeline for an ipo.
- [40:17]
F
So what I am hearing is that in terms of the conversion, which really has to happen first in the next one to two months, we're finally going to get final term, a final set of terms both on that commercial agreement because remember, OpenAI is looking for more diversity to sell its products through other cloud clouds. They also want to renegotiate their revenue share because these two players, Microsoft and Open Air, competing for the same enterprise contracts now. So all of that has to be ironed out. They also need to get approval from state AGs in Delaware and in California. And once they get to that point, then it unlocks a softbank financing and then they would be eligible to potentially get on that IPO path.
- [40:54]
A
And finally, Mac, I mean, I admit to have lost track of all of the litigation and all the different factions that, that were trying to oppose this move or change it. Is this now in the clear now or might there be something that slows it down?
- [41:06]
F
It is not in the clear. So Elon Musk has repeatedly brought different lawsuits against OpenAI and one of those cases is going to a jury trial in the spring. And that's part of why we also have these AGs in the mix, really scrutinizing that nonprofit structure. And you also have to keep this in mind. Elon Musk was a co founder of OpenAI.
- [41:26]
C
He left.
- [41:26]
F
He now runs a rival company, X AI and he has very big opinions about the direction of where Open Air should go. He also had that hostile takeover bid earlier this year looking to buy open air for $97 billion. So a lot at play.
- [41:40]
C
Mac, thanks. Mackenzie Sagalos. We do want to check on Gemini because it just reopened for trading. It had opened in terms of the first trade of the IPO probably just about 10, 15 minutes ago or so. Halt halted for volatility, but it is open for trading once again. It is higher by just about 43% right now. Coming up, Jim Cramer speaking with Tim Cook today and getting a look at the new iPhone air, Chinese Internet stock soar and the quantum trade that is back. All that and more in Rapid Fire.
- [42:18]
A
Sam.
- [42:44]
C
Welcome back to the Exchange. Let's catch you up on a few more stock stories that are on our radar. Time for Rapid Fire. First up, Jim Cramer getting a chance to speak with Apple CEO Tim Cook at the Corning plant in Kentucky where they will manufacture their precision glass for Apple's products. Jim, got a chance to see the new iPhone air.
- [43:01]
H
We've also got the air. It's so thin it may not show up on the camera.
- [43:06]
C
Hold it.
- [43:07]
A
You can't tell it's in your hand.
- [43:09]
H
It's so light. It's like you're holding the future in your hand. And it's the thinnest iPhone ever. It's so incredibly light. And it's pro performance in that smaller package.
- [43:25]
C
Pre orders began today. The stock is down 2%. You can see more of Jim's interview with Tim Cook and Corningcy at Wendell Weeks tonight on mad money at 6pm eastern time. You have to appreciate his enthusiasm. I could see that phone. I don't think that it disappears when you, when you turn it to its side. I get the point that it's, he's.
- [43:42]
A
Sort of workshopping ad copy on the fly there.
- [43:44]
C
Seems like maybe that's what you're holding the future in your hand.
- [43:48]
A
And I don't know. I mean, the fact that there's like not that much enthusiasm in the stock or among consumers yet it doesn't always tell you exactly how an Apple product is going to go. You know, a lot of remember the skepticism about the watch and the AirPods they build over time. We'll see if this one does.
- [44:02]
C
Yeah. Also, by the way, the launch in China is delayed because of regulatory issues and so that's been pushed out. It was previously advertised it would be available for preorder the same dates as in the US but now that's being pushed out. So that could be another hiccup there. Next up, speaking of China, Chinese Internet stocks having a Great week. Web ETF up more than 5%. Names like Baidu, Alibaba, NetEase all up more than 12%.
- [44:27]
A
Just massive momentum move. And the investors seem to feel as if, wow, we have a parallel AI mania to play because it's not just all happening in one place, they're kind of doing it on their own as well. And that plus the fact that the overall market has been given permission to run. I was pointing out earlier that it's actually driving the overall emerging markets index to a huge degree. If you just look at the top holdings of any emerging market markets etf, it's Tencent, Alibaba and Taiwan. Sami.
- [44:55]
C
Yeah, I mean, some of the things that we learned this week, Alibaba and Baidu are investing in their own chips, much like their counterparts here in the United States. Lower rates also obviously give a little bit of boost here for this trade topic. Three quantum stocks seeing some big gains today. Names like Ionq, Quantum Computing, D Wave Quantum, Rigetti Computing. The Wall Street Journal this morning writing about IBM's massive quantum push, which is, you know, partly driving this action, I.
- [45:19]
A
Would think it would seem. IONQ had some news. They got a decent approved in the uk, I think. But I do think it just sort of restarted this enthusiasm. And this is the kind of a sector that's almost perfect for these kind of retail trader stampedes and the speculative activity because guess what, there's no fundamentals today. It's all about, let's say in five years maybe we'll have a commercialized project. Even IBM and Google are saying it's that far out. And it's. But it's also very exotic science. And so you understand, I guess, why people get excited. Even though some of these individuals, individual companies are pretty insubstantial at this point.
- [45:52]
C
In terms of revenue, in terms of.
- [45:54]
A
Their own actual existing businesses. Yeah.
- [45:56]
C
And finally, coffee, peanut butter and pet food. JM Smucker downgraded to a halt from a buy at Argus today. The firm saying that amid an economic uncertain environment, Smucker has struggled to grow volume. Argus also concerned about rising coffee prices, pressuring margins. Coffee is up, by the way, more than 20% this year. I don't know if you noticed that. I noticed that at the corner grocery store, that's for sure. But all of these staple names just.
- [46:18]
A
They'Ve been terrible rough. And in fact, the packaged food part of Staples may be even worse. We know Kraft, Heinz and all the rest. There's really no escape from the coffee price pressure. I mean with the tariffs where they are, everybody just not another supply you can grab onto. And you know, pricing is kind of touch and go when it comes to something like Smucker. Course, the stocks are all cheap. By the way. Uncrustables, yes, is $1 billion revenue business this fiscal year for them. It's like more than 10% of the company.
- [46:44]
C
I think they could spin that out.
- [46:46]
A
Well, croes and handheld snacks or whatever.
- [46:50]
C
They, the market just doesn't want these sorts of products. And HHS could have a target on these products in terms of.
- [46:57]
A
Oh, that's additives. And it feels like the brands are just a little bit tired.
- [47:01]
C
Yep. All right, well, it's been quite a week. I'll see you tonight on fast money at 5:00pm Eastern Time. Chartmaster Carter. We'll be looking at this week's big run in Tesla and whether you should hold it.
- [47:09]
A
All right, that's it for us. Have a good weekend. Thank you for watching the exchange. Power Lunch starts now.
- [47:13]
C
You've been listening to the Exchange.
- [47:15]
A
Make sure you're subscribed to get each.
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C
Episode every day, same time, same place.
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A
Listen.
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B
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A
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